Hidden holiday charges
Hidden holiday spending charges
Four main charges apply…
- A 'load' on top of the exchange rate (debit and credit cards)
While exchange rates change daily, what you get always depends on the 'Visa/Mastercard wholesale rate'. It's about the best exchange rate possible, as it reflects currencies' real interchange value.
This should mean more euros, dollars or Costa Rican colons per pound, but unfortunately almost all cards secretly add a 'load', an extra charge, usually of 3%. So the higher the 'load', the worse the exchange rate you get. This means £100 worth of euro spending costs you £103. Worse still, it isn't broken down on statement, so you won't notice .
Technically, there are two types of loading on cards.
- The issuer fee is the load Visa adds itself, which has a standard setting of 0% in Europe and 1% for the rest of the world.
- The optional fee is added by the card provider, as its cut of the currency conversion. This can be split and altered, depending on each worldwide region.
- Cash withdrawal charges (debit and credit cards)
Withdraw money from an overseas cash machine and the card provider will add a fee, usually around 2.5% of the amount withdrawn with a minimum of around £3. Many people are aware of this charge for credit cards, but it's important to note it applies to most debit cards too.
Many overseas banks, especially in the USA, also charge an additional fee for withdrawing cash. Little can be done about this, except trying a few different banks to find the cheapest. Thus taking larger amounts out to cover a longer period is cheaper than lots of small withdrawals, though make sure your cash is stored securely.
- A penalty for spending (debit cards only)
Sadly, a few card providers have decided to take profiteering from holidaymakers up a level. Spend on a Halifax, Intelligent Finance, RBS, NatWest, Santander or Lloyds TSB debit card and you'll pay a fee each and every time. For example, Halifax adds £1.50 per transaction.
This means that the normal 'paying on the card's cheaper than making withdrawals' rule is defeated for these cards, so withdraw a large cash lump instead as it's cheaper. See the Holiday Cards From Hell section for more.
- Unexpected interest charges (credit cards only)
Normally repay a credit card in full at the end of the month and you don't pay any interest. Yet withdraw cash and even if it's paid off in full, many providers still charge interest, often at a higher rate than spending.
While this isn't exclusive to withdrawing cash abroad, in the UK it's rarely noticed as credit card cash withdrawals aren't common. Those who don't pay off in full will, of course, always be charged interest.